Aer Lingus has identified institutions interested in taking
holdings of as much as 10 percent which could become available
should the Irish government opt to sell its own 25 percent
stake, Chief Executive Officer Christoph Mueller said.

“We’d place it in the market,” Mueller said in a telephone
interview. “We’ve identified a lot of demand for Aer Lingus
shares in Europe, but also in the U.S., very surprisingly.”

With Ryanair’s 29.8 percent holding in Aer Lingus making it
the No. 1 shareholder, the low-cost operator could take control
of its rival even without buying government stock. Mueller said
that Etihad Airways, with a 2.99 percent stake, has limited room
for maneuver because of a rule that caps ownership of European
Union airlines at 49 percent for investors outside the block.

“Etihad’s problem is that they cannot take a majority,” the
CEO said today. “If you want to respond to a majority takeover
bid, that’s a restriction. Generally we would not favor any one
shareholder, but a competitor taking a majority is not in our
interests. For the rest we have absolutely no restrictions.”

Irish Transport Minister Leo Varadkar said on May 1 after
Etihad purchased its holding that the involvement of the Abu
Dhabi-based carrier was a “good thing.” He added that the state
was ready to sell its stake at the right price and time, though
wasn’t in talks with the Gulf airline.

‘Bad Deal’

Aer Lingus was trading unchanged at 1.07 euros -- 23 cents
below the bid price -- as of 12:07 p.m. in Dublin, where both it
and Ryanair are based. The stock has advanced almost 69 percent
this year, valuing the company at 567 million euros.

Ryanair traded down 0.7 percent at 4.09 euros. Shares of
Europe’s biggest discount airline have added 13 percent so far
this year for a market value of 5.9 billion euros.

Aer Lingus said today in a statement that Ryanair’s offer
of 1.30 euros a share issued yesterday undervalues its business.

“We’re profitable and our earnings potential should reflect
a higher share price,” Mueller said, adding that the bid amounts
to “a very bad deal,” given that his airline has sufficient cash
to pay out as much as 1.9 euros a share from its balance sheet.

Ryanair is resuming its pursuit of Aer Lingus after EU
regulators blocked two previous takeover attempts, and Mueller
said the new proposal remains “incapable of completion.”

Price Penalty

Michael O’Leary, Ryanair’s CEO, says chances of clearing
antitrust hurdles have been boosted by mergers among other
European carriers, falling traffic in Dublin that leaves room
for new entrants, and the government’s plan to sell its stake.

A takeover would also push up fares at the worst possible
time for the Irish economy, Mueller said.

“We know exactly what is going to happen to prices,” the
CEO said. “Taking the travel propensity of the Irish population
-- which is the highest in Europe -- into account, that would be
very, very counterproductive, particularly for the overall
economic turnaround we are trying to achieve here.”

The bid raises clear monopoly concerns since Aer Lingus and
Ryanair overlap on 75 percent of routes, he said, adding that
competition between the two would “simply cease to exist to
Brussels, to London, and so on.”

In selling its stake in Aer Lingus the government would
“certainly consider connectivity for Ireland,” as well as the
price, and has always favored a two-carrier model, Mueller said.